The new board of fraud-hit Satyam Computer Services will meet again on Saturday to look for ways to raise new funds after both the government and the company rejected talk of a state rescue bid.
Satyam, India’s No. 4 software services exporter, has been battling for survival since chairman Ramalinga Raju suddenly resigned last week, revealing profits had been falsified for years and that $1 billion of cash on the books did not exist.
Media speculation of government aid has mounted as analysts questioned whether India’s biggest corporate fraud had left the outsourcing firm with enough money to pay its 50,000 staff.
But Economic Affairs Secretary Ashok Chawla told reporters on Thursday that the government was not looking at any direct support for the company or bailout “at this stage.”
Deepak Parekh, a senior banker and Satyam board member, said it had 17 billion rupees ($348 million) in receivables and may not need new funding if the money came in on time.
But Parekh added the board would consider bank loans if necessary.
The government, which dissolved Satyam’s previous board last week, appointed three new directors on Sunday and another three late on Thursday to help steer the company out of crisis.
Company Affairs Minister Prem Chand Gupta said the first impression from the new directors about the company is that its operations are sound and that “by and large” major customers were willing to remain with the firm.
“All these are steps in the right direction … but they need to get a CEO and CFO in place first to run the company’s daily operations. That should be a priority,” said Gajendra Nagpal, chief executive of Unicon Financial.
Satyam’s shares jumped as much as 40 percent on Friday to 28.40 rupees after the government doubled the size of the board, but the stock has still lost over 80 percent of its value since the massive fraud was revealed.
Many questions about the accounting scandal remain to be answered: how large is it, who benefited, and how did the perpetrators manage to conceal it for so long?
Even if Satyam escapes a near-term cash crunch, it faces a long road to recovery.
The new board will have to keep clients from defecting to Satyam’s rivals, fend off a growing number of lawsuits over the scandal and try to rebuild investor trust.
Lazard Asset Management said in a notice to the stock exchange on Friday it had sold all of its 5.3 percent holding in Satyam through open market transactions on Thursday.
Satyam’s clients include corporate giants such as Nestle and General Electric.
Satyam’s founder Raju, his brother who was the managing director of the company and the former chief financial officer have been charged and are being held in a jail.
Raju’s lawyer Bharat Kumar said his bail application would be heard by a court on Friday.